ACCT 444 Week 2 Quiz

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ACCT 444 Week 2 Quiz

1. (TCO 4) In connection with the audit of financial statements, an independent auditor could be responsible for failure to detect a material fraud if(Points : 3)

statistical sampling techniques were not used on the audit engagement.
the auditor planned the audit in a negligent manner.
accountants performing important parts of the work failed to discover a close relationship between the treasurer and the cashier.
the fraud was perpetrated by one employee who circumvented the existing internal controls.

 

Question 2.2. (TCO 4) The risk that the audit will fail to uncover a material misstatement is eliminated (Points : 3)

if a client has strong internal controls.
if a client follows generally accepted accounting principles (GAAP).
when the auditor has complied with generally accepted auditing standards (GAAS).
under no circumstances can this risk be completely eliminated.

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Question 3.3. (TCO 4) A third-party beneficiary is one that (Points : 3)

has failed to establish legal standing before the court.
does not have privity of contract and is unknown to the contracting parties.
does not have privity of contract, but is known to the contracting parties and intended to benefit under the contract.

may establish legal standing before the court after a contract has been consummated.

 

Question 4.4. (TCO 4) Tort actions against CPAs are more common than breach of contract actions because (Points : 3)

there are more torts than contracts.
the burden of proof is on the auditor rather than on the person suing.
the person suing need prove only negligence.
the amounts recoverable are normally larger.

 

Question 5.5. (TCO 4) The auditor’s best defense when material misstatements are not uncovered is to have conducted the audit (Points : 3)

in accordance with auditing standards.
as effectively as reasonably possible.
in a timely manner.
only after an adequate investigation of the management team.

 

Question 6.6. (TCO 3) Which of the following statements is most correct regarding errors and fraud? (Points : 3)

An error is unintentional, whereas fraud is intentional.
Frauds occur more often than errors in financial statements.
Errors are always fraud and frauds are always errors.
Auditors have more responsibility for finding fraud than errors.

 

Question 7.7. (TCO 3) In the fraud triangle, fraudulent financial reporting and misappropriation of assets (Points : 3)

share little in common.
share most of the same risk factors.
share the same three conditions.
share most of the same conditions.

 

Question 8.8. (TCO 3) After fraud risks are identified and documented, the auditor should evaluate factors that _____ fraud risk, before developing an appropriate response to the risk of fraud. (Points : 3)

enhance
reduce
increase
increase or decrease

 

Question 9.9. (TCO 3) Which of the following is a factor that relates to incentives to misappropriate assets? (Points : 3)

Significant accounting estimates involving subjective judgments
Significant personal financial obligations
Management’s practice of making overly aggressive forecasts
High turnover of accounting, internal audit and information technology staff

 

Question 10.10. (TCO 3) Which of the following characteristics is most likely to heighten an auditor’s concern about the risk of material misstatements, due to fraud in an entity’s financial statements? (Points : 3)

Employees who handle cash receipts are not bonded.
The entity’s industry is experiencing declining customer demand.
Internal auditors have direct access to the board of directors and the entity’s management.
The board of directors is active in overseeing the entity’s financial reporting policies.

 

 

 

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